Does public sector inefficiency constrain firm productivity? Evidence from Italian provinces

Raffaela Giordano (), Sergi Lanau (), Pietro Tommasino and Petia Topalova
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Sergi Lanau: IMF

International Tax and Public Finance, 2020, vol. 27, issue 4, No 9, 1019-1049

Abstract: Abstract This paper studies the effect of public sector efficiency on firm productivity using data from more than 400,000 Italian firms. Exploiting the large heterogeneity in the efficiency of the public sector across Italy’s provinces and the intrinsic variation in the dependence of industries on the government, we find that public sector inefficiency significantly reduces the productivity of private sector firms. The results suggest that raising public sector efficiency could yield large economic benefits: If the efficiency in all provinces reached the frontier, output per employee for the average firm would increase by 9%.

Keywords: Public sector efficiency; Firm productivity; Regional development; Quality of government (search for similar items in EconPapers)
JEL-codes: H40 H70 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (7)

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Working Paper: Does Public Sector Inefficiency Constrain Firm Productivity: Evidence from Italian Provinces (2015)
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DOI: 10.1007/s10797-020-09600-x

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